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20111027a_Thursday Internal Control Concepts

20111027a_Thursday Internal Control Concepts - SU 5...

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SU 5: Internal Control Concepts Acct 3222 Fall 2011
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5.1 Introduction to Internal Control Ø 1. The primary objective of procedures performed to obtain an understanding of internal control is to provide an auditor with A. Knowledge necessary for audit planning. B. Evidential matter to use in assessing inherent risk. C. A basis for modifying tests of controls. D. An evaluation of the consistency of application of management’s policies.
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5.1 Introduction to Internal Control Ø 2. An auditor uses the knowledge provided by the understanding of internal control and the assessed risk of material misstatement primarily to A. Determine whether procedures and records concerning the safeguarding of assets are reliable. B. Ascertain whether the opportunities to allow any person to both perpetrate and conceal fraud are minimized. Modify the initial assessments of inherent
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5.1 Introduction to Internal Control Ø 3. In an audit of financial statements, an auditor’s primary consideration regarding an internal control is whether the control A. Reflects management’s philosophy and operating style. B. Affects management’s financial statement assertions. C. Provides adequate safeguards over access to assets.
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5.1 Introduction to Internal Control Ø 4. Which of the following most likely would not be considered an inherent limitation of the potential effectiveness of an entity’s internal control? A. Incompatible duties. B. Management override. C. Faulty judgment. D. Collusion among employees.
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5.2 Internal Control Components Ø 5. An auditor would most likely be concerned with controls that provide reasonable assurance about the A. Efficiency of management’s decision-making process. B. Appropriate prices the entity should charge for its products.
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